PricewaterhouseCoopers Inc. will be receiver and manager of the property of Sextant Capital Management, Sextant Capital GP Inc. and Sextant Strategic Opportunities Hedge Fund, Mr. Justice Geoffrey Morawetz said in his ruling.

The evidence provided by the Ontario Securities Commission and others "raise serious and troubling concerns," said Judge Morawetz. "I am satisfied that the investors' interest will not be served by maintaining the status quo.

OSC staff have said that nearly 250 Canadians invested just under $30-million in the Sextant Canadian hedge fund since 2006. The request for a receiver by OSC staff came after the regulator last December ordered Otto Spork, a former dentist and driving force behind Sextant, to temporarily stop selling his hedge fund.

"A receiver is necessary for the Sextant Canadian fund to ensure that investors' assets in the fund are managed and potentially distributed in an orderly fashion," Judge Morawetz wrote.

The Sextant records are such that "investors' funds are not completely accounted for" and identified shortcomings in the operations" of the Sextant entities require an independent review, he added.

OSC staff have alleged that Mr. Spork and related parties have invested illegally in firms with rights to Icelandic glaciers for the purpose of selling bottled water. The Sextant Canadian hedge fund run by Mr. Spork was posting spectacular return figures last year, including a 159-per-cent return for the first 11 months of 2008.

At a court hearing in April, OSC lawyer Susan Kushneryk argued that the Sextant entities be put into receivership to avoid more "harm to investors" who have money in its Canadian hedge fund.

There is ample evidence of "potential fraud, misappropriation of investors' money, misrepresentation, self-dealing and record manipulation," Ms. Kushneryk said.

A receiver is needed to oversee the fund and management because there is insufficient money for redemptions, she said. There are 118 investors who want out, and that would require more than $18-million. There is only $1.25-million in bank and custodial accounts that were frozen in December, she said.

OSC staff alleged that the fund invested about 90 per cent of its assets in Iceland Glacier Products, which breached its 20-per-cent investment restriction limit per asset. The fund's inflated returns, on which management fees were based, came from valuations that were "not credible," Ms. Kushneryk said. Iceland Glacier Products has "business plans," but is not an operating company with revenue, she said

In an affidavit, OSC investigator Raymond Daubney said that Mr. Spork provided Canaccord Capital Corp. with forged documents purportedly from the Los Angeles Department of Water among others indicating that they would buy water from the glacier companies.

According to the OSC, Sextant also ran two offshore funds - the Sextant Hybrid Fund and Sextant Water Fund - incorporated in the Cayman Islands that apparently had $100-million (U.S.) in assets at the end of 2008. Their portfolios also run similarly to the Canadian fund.

The OSC said PriceWaterhouseCoopers will have a Web site (www.pwc.com/car-sextant) up and running soon for clients of Sextant who have questions about the receivership.

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